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2024-04-19

Why EDI Integration is Important for Your Business

 

In its most simple form, EDI (Electronic Data Interchange) allows users to facilitate computer-to-computer exchange of business documents in a standard electronic format between partner ecosystem. It enables companies to:

  • Reduce costs

  • Automate workflows

  • Speed up document processing

  • Eliminate errors

  • Allow smoother relationships with partners and customers 

EDI transactions encompass important information that helps companies drive business exchanges, and a popular example is that of EDI order processing. 

So, the question is how does EDI work?

Initially, a buyer sends a purchase order for a product from a supplier. Then, the supplier sends an invoice, and finally, both parties exchange acknowledgment receipts. A common EDI transaction used in this is advanced shipping notice (ASN). The ultimate objective of ASN is to provide tracking and packing data before the delivery happens. Once the ASN with billing information is validated in the receiving open interface and imported into purchasing, a specific invoice for the shipment is automatically created. 

Importance of EDI Integration 

Companies need EDI integration to create a workflow between trading partners. It is achieved through two steps:

  • Establishing the EDI documents, transactions, protocols, and endpoints that will help users exchange data with their trading partners.

  • Translating EDI data into a format that can be used that can support back-end technical environments, such as ERP system or accounting solution. This allows both trading partners to speak in a common language and communicate with one other.

Finally, the files can be converted into a proprietary file format like IDoc or JSON, which can be easily ingested into back-end systems for further usage. 

EDI integration helps a company in a number of ways. It provides:

Data Accuracy: Automating EDI transmission among trading partners, along with ingestion and transformation into ERP removes the need for manual intervention. Manual methods, by nature, encompass errors. With the creation of automated data flows, such as errors can be prevented, turning companies EDI compliant. 

Faster Business Cycle: EDI integration allows enterprises to alleviate processing time. As a result, the time duration of completion of order-to-shipment business cycles can be reduced by as much as 50 to 60%. 

Better Trading Partner Visibility: EDI integration provides higher visibility into processes. When data is accurate, automated and easily accessed by the ERP, users can easily view how the EDI partners are impacting companies’ ease of doing business. 

Taking Business Forward with Modern EDI Integration

It’s evident that EDI remains the most common and widely used standard for B2B transactions. But if your company still rely on legacy solutions, the task of handling EDI integrations becomes difficult. 

Here are three indicators that show your system is broken:

EDI does not connect to your back-end systems.

  • EDI documents fail to get integrated into back-office applications. 

Custom coding is required which’s tedious and time-consuming.

  • Constantly needing to update in-house custom scripts.

Manual intervention is needed.

  • Manual processes make the system more error-prone and fragile.

On detecting any of the aforementioned signs, one must adopt a revamped integration strategy. The need of the hour is to adopt a modern integration approach that supercharges EDI integration capability and facilitates faster transactions. Not only will that benefit your company but your entire business ecosystem.